Buffett grounds Berkshire's airline stocks
| Buffett admits mistake on airline stocks and sells The biggest news out of this weekend's "virtual" Berkshire Hathaway annual shareholders meeting is that Warren Buffett, who once said "a farsighted capitalist ... would have done his successors a huge favor by shooting Orville (Wright) down" at Kitty Hawk, has given up on Berkshire's airline stocks, locking in billion of dollars in losses.
In 2016, drawn in by the pricing power produced by consolidation among carriers, Berkshire bought big stakes in the nation's four biggest carriers -- American, Delta, Southwest, and United.
All four hit all-time highs after the purchase. In the fall of 2017, they were worth a total of more than $9 billion.
In April, every share was sold. As of last Friday, the stakes would have been worth about $4 billion.
The problem, of course, is the massive reduction in air travel due to the COVID-19 pandemic, and Buffett didn't see the fallout going away anytime soon, with the carriers being left with too many planes and too much debt.
He praised the managements of the four airlines, but said the virus had simploy taken too big, and too long lasting, a toll.
Buffett had an unpleasant experience with a 1989 investment in USAir. At least in that instance, Berkshire held on long enough to make a small profit.
You can see what Buffett has said about airline stocks over the years at the "Buffett's bumpy ride with the airline industry" page on CNBC's Warren Buffett Archive.
Also ...
QUESTIONS OR COMMENTS
Please send any questions or comments about the newsletter to me at alex.crippen@nbcuni.com. (Sorry, but we don't forward questions or comments to Buffett himself.)
If you aren't already subscribed to this newsletter, you can sign up here.
For information on how to protect yourself and what to do if you think you are sick, go to the CDC's Coronavirus (COVID-19) information page.
We'll be back Friday with the regular weekly edition.
-- Alex Crippen, Editor, Warren Buffett Watch
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Post a Comment